Monex Morning Report – Tue 8 Sep 2020

OVERNIGHT HIGHLIGHTS

U.S. markets closed for the Labor Day break; Asian stocks to rise

United Kingdom to quit Brexit trade-deal talks if no agreement with European Union by October 15; Trump vows to sharply scale back U.S. economic ties with China

Top Market News

UK recovery from lockdown deserves more credit: BoE’s Haldane

The Bank of England’s chief economist Andy Haldane hailed the recovery in Britain’s economy from its coronavirus lockdown shock, striking a more upbeat tone than several of his colleagues recently. Haldane told City AM newspaper that the “recovery isn’t being given enough credit” and the economy “has bounced back” in large part because consumers had shown themselves to be “incredibly resilient and adaptive and so too have businesses.”

Originating Source

United Kingdom to quit Brexit trade-deal talks if no agreement with European Union by October 15

British Prime Minister Boris Johnson has warned Britain could walk away from post-Brexit trade talks with the European Union within weeks ahead of the next crucial round of discussions. Mr Johnson insisted a no-deal exit would be a “good outcome for the UK”. With talks deadlocked, Mr Johnson said an agreement would only be possible if EU negotiators were prepared to “rethink their current positions”. The EU, in turn, accused Britain of failing to negotiate seriously. Britain left the now 27-nation EU on January 31, more than three years after the country voted in favour of ending more than four decades of membership. The political departure will be followed by an economic break when an 11-month transition period ends on December 31 and the UK leaves the EU’s single market and customs union. Without a deal, 2021 will bring tariffs and other economic barriers between the UK and the bloc, its biggest trading partner. Mr Johnson said the country would “prosper mightily” under a no-deal Brexit.

Originating Source

Softbank shares tumble after ‘Whale’ reports

Softbank. (T:9984) shares tumbled 7.2% to their lowest in two months in the wake of a report suggesting that it had been a major player in the wild summer rally in U.S. tech stocks, using options to secure highly leveraged short-term returns. While most of its trades still appear to be profitable at current levels, the report has revived unease about Softbank’s strategy and governance, threatening the stock’s robust performance since March. It has more than doubled since founder Masayashi Son moved to draw a line under poor investments in WeWork, Uber (NYSE:UBER) and others, and return cash to shareholders. Having been exposed as the “Whale” that has moved the market, Softbank is now a bigger and easier target for others to bet against.

Originating Source

Trump vows to sharply scale back U.S. economic ties with China

“President Donald Trump said he intends to curb the U.S. economic relationship with China, contrasting himself with Joe Biden by threatening to punish any American companies that create jobs overseas and to forbid those that do business in China from winning federal contracts. “We’ll manufacture our critical manufacturing supplies in the United States, we’ll create ‘made in America’ tax credits and bring our jobs back to the United States and we’ll impose tariffs on companies that desert America to create jobs in China and other countries,” Trump said at a White House news conference on Monday where he complained at length about his Democratic re-election opponent. “If they can’t do it here, then let them pay a big tax to build it someplace else and send it into our country,” he said of U.S. corporations. “We’ll prohibit federal contracts from companies that outsource to China and we’ll hold China accountable for allowing the virus to spread around the world.” Trump has recently entertained the idea of “decoupling” the U.S. economy from China, a dream of U.S. China hawks. ”

Originating Source

Trump hints at vaccine ‘surprise’ as Biden demands transparency

President Donald Trump hinted Monday that the U.S. could approve a coronavirus vaccine in October, ahead of the November election, as Joe Biden demanded transparency from the government as it studies the shots. “This could’ve taken two or three years, and instead it’s going to be — going to be done in a very short period of time,” Trump said during a news conference in which he criticized Biden for his skepticism that the FDA is operating free of political pressure. “Could even have it during the month of October,” Trump added, calling Biden’s doubts “political lies.”

Originating Source

Goldman’s Oppenheimer says tech can continue driving bull Market

“Technology stocks remain investors’ best bet and can continue driving returns in the current bull market, according to Peter Oppenheimer, Goldman Sachs Group Inc.’s chief global equity strategist, even as the near-term risk of a market correction persists. The Wall Street guru is advising clients to keep their faith in tech stocks after numerous market players got burned last week during a plunge in the Nasdaq 100 Index, driven by some of the frothier tech companies like Amazon.com and Apple Inc. Goldman is maintaining its overweight recommendation in tech stocks in every region thanks to the sector’s strong cash generation, earnings and stable balance sheets, said Oppenheimer. In backing some of the biggest stock market winners of the past six months, Oppenheimer is wagering on an acceleration in the “digital revolution” fueled by lockdowns and increased use of the internet and technology as working from home became the global norm. Even as people in developed economies start returning to the office and curbs are relaxed, Goldman expects further benefits for tech equities from accelerating digitalization. “We think this transformation of the economy and stock markets has further to go,” said Oppenheimer in a note on Monday. “These companies could continue to drive valuations and returns in this bull market.” ”

Originating Source

Australia Central Bank to Expand QE, may Cut, economists Say

“Australia’s central bank will boost its bond-buying program or cut interest rates to help revive the economy from its first recession in almost 30 years, a survey showed. Seven of 11 economists predict the Reserve Bank will ramp up quantitative easing by expanding its bond purchasing program, with UBS Group AG’s George Tharenou positing that this could begin as soon as next month. Most of the others, however, expect it will occur either toward the end of this year or early 2021. Cutting the cash rate and 3-year yield target to 0.10% was less popular. Of the three who said it was likely, Deutsche Bank AG’s Phil O’donaghoe expects the easing to happen by February and AMP Capital Investors Ltd.’s Shane Oliver similarly sees it in the next six months. Bloomberg Economics’s James McIntyre anticipates such a move in November, which would be shortly after third quarter inflation data and just before the RBA’s updated forecasts are released. ”

Originating Source

IEA: Oil Demand Recovery Has Stalled

The International Energy Agency (IEA) joined the chorus of analysts saying that the pace of global oil demand recovery has stalled in recent weeks on the back of weak refining margins, a lack of recovery in jet fuel demand, and uncertainties over global economic growth, including in the world’s top oil importer, China. Although the IEA doesn’t forecast major slowdowns in demand going forward, global oversupply has yet to show strong signs of drawdowns, Keisuke Sadamori, Director, Energy Markets and Security at the IEA, told Reuters. “It doesn’t seem like a massive stock draw seems to be happening yet,” Sadamori told Reuters, noting that “We are not seeing a robust pickup in refining activity, and jet fuel is the big problem.” Uncertainties over the course of China’s economy and by extension, oil demand, are also weighing on the oil market, according to the official.

Originating Source

Top Trump News

Faux-Bama

Before he became president, Donald Trump’s strong dislike of Barack Obama saw him hire a “Faux-Bama” to take part in a video in which he mocked and “fired” him, it has been claimed. According to a new book by his former personal lawyer and fixer Michael Cohen, as reported by CNN, Mr Trump employed a lookalike for a skit in which he “ritualistically belittled the first black president and then fired him”. The claim comes from Mr Cohen’s upcoming memoir Disloyal: The True Story Of The Former Personal Attorney To President Donald J Trump.

Originating Source

China and Biden

Donald Trump lashed out at his opponent Joe Biden’s handling of China and suggested Americans should begin thinking about a dramatic economic “decoupling” from the world’s second-biggest economy. In a long-anticipated push to position himself as the 2020 presidential campaign’s toughest anti-China hawk, Mr Trump vowed to establish US-based supplies of critical goods using “made in America” tax credits. Mr Trump also repeated a threat he first issued in his acceptance speech at last month’s Republican National Convention: “We’ll impose tariffs on companies that desert America to create jobs in China and other countries.”

Originating Source

Financial recovery

“Biggest & Fastest Financial Recovery In History. Next year will be BEST EVER, unless a very Sleepy person becomes President and massively raises your taxes – In which case, CRASH!”

Originating Source

Economic Indicators

China Trade Balance (USD)

China’s trade surplus widened sharply to USD 58.93 billion in August 2020 from USD 34.72 billion in the same month the previous year and far above market expectations of USD 50.5 billion. Exports rose by 9.5 percent, the fastest pace since March last year, while imports unexpectedly fell by 2.1 percent. The country’s trade surplus with the United States widened to USD 34.24 billion in August from USD 32.46 billion in July. Exports from China soared 9.5 percent year-on-year to USD 235.3 billion in August of 2020, above market forecasts of a 7.1 percent growth and after a 7.2 percent rise a month earlier. This marked the third straight month of increase in overseas sales and the fastest rate since March of 2019, amid further improvement in global demand as more countries lifted coronavirus-led restrictions. Chinese exports have been boosted by record shipments of medical supplies and robust demand for electronic products. Sales of refined products increased 33.1 from the previous month and those of unwrought aluminium and products went up 6.87 percent. In contrast, shipments fell for steel (-0.62 percent), rare earths (44 percent) and grains (-36.77 percent). Exports to the United States rose 20 percent to USD 44.8 billion while those to the European Union declined 20.1 percent to USD 35.7 billion.

Germany Industrial Production MoM

Industrial production in Germany rose by 1.2 percent month-over-month in July 2020, compared to market expectations of a 4.7 percent gain and after an upwardly revised of 9.3 percent growth, which was the steepest increase on record. Production grew for intermediate goods (4 percent), capital goods (2.1 percent), and consumer goods (1.8 percent). Output in the automotive industry went up by 6.9 percent, but it was still by over 15 percent lower than in February 2020. In contrast, output declined for both construction (-4.3 percent) and energy (-0.6 percent). Year-on-year, industrial output tumbled 10 percent.

United Kingdom House Price Index

The Halifax house price index rose 5.2 percent from a year earlier in August of 2020, the largest annual increase since late 2016, as a surge in market activity has driven up house prices through the post-lockdown summer period, fuelled by the release of pent-up demand, a strong desire amongst some buyers to move to bigger properties, and the temporary cut to stamp duty. On a monthly basis, prices went up 1.6 percent, slightly above forecasts of 1.5 percent. The average price of a property reached over £245,000 for the first time on record. “Notwithstanding the various positive factors supporting the market in the short-term, it remains highly unlikely that this level of price inflation will be sustained. The macroeconomic picture in the UK should become clearer over the next few months as various Government support measures come to an end, and the true scale of the impact of the pandemic on the labour market becomes apparent”, Russell Galley, Managing Director at Halifax said.

Economic Calendar

Tuesday

Japan Gross Domestic Product (GDP) QoQ

Wednesday

US EIA Short-Term Energy Outlook

Thursday

Canada Interest Rate Decision

Thursday

Euro Zone Deposit Facility Rate

Thursday

US Initial Jobless Claims

Thursday

US Producer Price Index (PPI) MoM

Friday

US Crude Oil Inventories

Friday

UK Gross Domestic Product (GDP) MoM

Friday

US Core Consumer Price Index (CPI) MoM